Tony Blair's biographer, who once described him as a "political colossus" with achievements as least as great as Margaret Thatcher's, has warned that his reputation will be destroyed if he refuses to apologise for his errors over the Iraq war.

Writing in today's Observer, Anthony Seldon argues that the former prime minister who led Labour to three election victories will "diminish everything else he achieved" if he continues to try to justify his actions and refuses to show "contrition".

He accuses Blair of "perversity" and "insensitivity".

Seldon says Blair possessed a rare gift for understanding the public mood and an ability to speak in a way "that touched the British psyche better than any prime minster since Winston Churchill".

But he argues that he "lost it" when he turned from a populist to a conviction politician, driven by his Christian beliefs and a sense of moral purpose that made him sure he was always right.

It is clear that the former prime minister plunged further in Seldon's estimation following a BBC interview last weekend in which he said the war in Iraq would have been justified even if it had been known at the time that Saddam Hussein possessed no weapons of mass destruction, on the grounds of "the notion of him as a threat to the region".

The comments drew widespread criticism, including from Sir Ken Macdonald, the former director of public prosecutions.

As Blair prepares to give evidence to the Iraq inquiry early in the new year, Seldon argues that the appearance will be the final chance to admit his mistakes.

"Where Blair should accept responsibility is for misleading the British public over the reason for committing British troops to fight," Seldon writes. "While the intelligence was sufficient to convince most insiders across the world that Saddam had powerful weapons, Blair could and should have probed the '45 minutes' thesis more on WMDs, and given far greater weight to the moral case for war over WMDs. If this had failed to sway parliament, then he should have accepted that verdict."

Blair should also apologise, he adds, for failing to extract further concessions from the US and – the gravest error – for lack of postwar planning.

Seldon remains in awe of Blair's record, but warns: "The war and its aftermath continue to stalk him and diminish everything else he achieved. The moral certainty he displays is one side of Christianity; the other is humility. The more we hear of the latter, the quicker the scar of Iraq on his own and on Britain's reputation will begin to heal."

Blair will give evidence in public, but can request to make statements in private if he believes they would compromise national security. Alastair Campbell, Blair's former spin doctor, is also expected to be called in the new year.